Cash makes a comeback

Folding money is now chosen for 60% of transactions as hard-pressed shoppers cut down on the cards.

Last Updated: 21 May 2015

The figure is up 6% from last year, says the British Retail Consortium’s snappily-titled Cost of Collection survey, and is yet another indicator that the economic slowdown is starting to bite. ‘Total retail spending continues to grow,’ says BRC director general Stephen Robinson in predictably bullish form, ‘but the widening gap between the amount spent in cash and the amount spent using cards suggest that customers want to keep tight control of their finances.’

So perhaps the great British consumer is not quite so feckless as all those debt burden headlines and ‘my credit card hell’ stories would have us believe. The clear virtue of using cash for the weekly shop is that once it’s gone, it’s gone, so the temptation to stock up on things you don’t actually need is that much easier to resist.

What’s more, as the survey goes on to suggest, the rising popularity of cash is probably good news not only for customers’ budgeting but also for the shops themselves. For the cost to the retailer of processing a typical cash transaction is a modest two pence, compared to the 8 pence charged by banks for the average debit card transaction and a whopping 34 pence for a credit card purchase.

Which all adds up to a lot more greenbacks for the banks: so much for ‘The cashless society’. Not only do banks get to charge you interest but the shops you buy all your consumer durables from have to pay them through the nose, too. In fact, what really happens is that the customer ends up paying twice every time they use a card, as most retailers – not being of charitable status - simply add those charges onto the price. Having said all that, cards are understandably still the favoured means for larger purchases – cash only accounts for 34% of transactions by volume.

The BRC says that retailers are, by and large, fed up with being strong-armed into accepting all manner of iniquitous charging variations for cards. Why are they charged more for processing a big credit card purchase than a small one? The cost to the card provider is the same. And why should they be compelled to accept all cards branded with a given scheme’s logo, when in reality the fees they pay can vary widely? All good questions, as far as we can see here at MT.

But beyond the short term fluctuations in the popularity of cash there lies a bigger fundamental point here. The technology has existed for some years now to facilitate a much wider use of smart card and cashless payment systems, which could in theory make life much quicker, simpler – and even cheaper – for all of us. But until banks and retailers can learn to share the cake a little less fractiously, progress towards this goal is likely to be slower than the ‘cash only’ queue at the supermarket.

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